Questions from Managerial Accounting

Q: Explain the following assertion: “Price setting generally requires a balance

Explain the following assertion: “Price setting generally requires a balance between market forces and cost considerations.”

Q: Briefly explain the concept of economic, profit maximizing pricing. It

Briefly explain the concept of economic, profit maximizing pricing. It may be helpful to use graphs in your explanation.

Q: Define the following terms: total revenue, marginal revenue, demand

Define the following terms: total revenue, marginal revenue, demand curve, price elasticity, and cross-elasticity.

Q: Describe three limitations of the economic, profit maximizing model of pricing

Describe three limitations of the economic, profit maximizing model of pricing.

Q: Write the general formula for cost-plus pricing, and briefly

Write the general formula for cost-plus pricing, and briefly explain its use.

Q: Give an example of a noncash expense. What impact does such

Give an example of a noncash expense. What impact does such an expense have in a capital-budgeting analysis? Explain how to compute the after-tax impact of a noncash expense.

Q: List the four common cost bases used in cost-plus pricing

List the four common cost bases used in cost-plus pricing. How can they all result in the same price?

Q: List four reasons often cited for the widespread use of absorption cost

List four reasons often cited for the widespread use of absorption cost as the cost base in cost-plus pricing formulas

Q: List three advantages of pricing based on variable cost.

List three advantages of pricing based on variable cost.

Q: Explain the importance of the excess-capacity issue in setting a

Explain the importance of the excess-capacity issue in setting a competitive bid price.